Productivity Commission on housing affordability

April 11th, 2012 at 2:00 pm by David Farrar

The has released its final report into housing affordability.

Their findings and include:

  • Real house prices doubled between 2001 and 2007
  • The house price to disposable income ration increased from 3 to 5.5 from 2001 to 2007
  • 58% of renters can not afford to buy a house at the lower quartile price, assuming standard bank lending criteria
  • Section prices in Auckland are on average 60% of the cost of a dwelling, compared to 40% elsewhere
  • Land 2 kms inside Auckland’s urban limit costs 8.65 times as much as land 2kms outside

And recommendations include:

  • Increasing land supply for new housing should include moderate-density development of brownfield sites and development of greenfield sites close to existing centres, local employment, and services.
  • Auckland Council should show in its final Auckland Plan how it has considered and reconciled affordable housing alongside its other priorities.
  • Bring significant tracts of greenfield and brownfield land to the market in Auckland – identify and assemble land that could be quickly released and made ready for development, signal land with future potential for urban development, and make a commitment to major offsite infrastructure capacity.
  • Territorial Authorities to:
    -Take a less constrained approach to the identification, consenting, release, and development of land for housing in the inner city, suburbs, and city edge.
    – Adopt a strategy that allows for both intensification within existing urban boundaries and orderly expansion beyond them.
    -Develop strategies that promote adequate competition between developers for the right to develop land.
  • The Department of Building and Housing publish, for each BCA, the total time taken between receiving applications and finally granting consents, and the number of occasions where each BCA has used the ‘stop the clock’ provision.
  • The Department of Building and Housing audit the ‘stop the clock’ information from a sample of BCAs.

Now some of the usual suspects will say “No we can’t do it” because they think larger cities means more roads and more roads are of course evil. Now sure you can have that view, but be aware that the price of keeping to that view is that more and more low to middle income families will never get to own their own home, and will probably also end up paying more to rent than in the past.

For those who can afford to buy one, or even more than one house, then refusing to makes changes to reduce the cost of land and housing, will be great for the well off.

17 Responses to “Productivity Commission on housing affordability”

  1. campit (482 comments) says:

    We need to start talking about the average cost of a *dwelling*, as opposed to the average house price. For instance if Auckland was to build more three bedroom townhouses and apartments, then the average cost of a 3 bedroom dwelling would decrease.

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  2. SalParadise (54 comments) says:

    People might find this of interest:

    (I thought it was an April Fools joke at first, see the date, but it appears to be legit)

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  3. East Wellington Superhero (1,143 comments) says:

    Most people who say “no we can’t do that”, are already home owners.
    Further to that, renters have a decreased ‘buy-in’ to their community at a street and neighbourhood level. More people buying their own home means tighter communities and the social benefits of this. Someone once suggested to me that town-planners have more influence on people’s lives than MPs. I sometimes agree.

    Will be interesting to see what David Shear thinks. Does Labour really want young NZers to get ahead?

    Of course the usual pea-brains with complain about more roads, more traffic, more pollution, more dead whales, more drowning polar bears, more blah blah blah.

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  4. flipper (5,339 comments) says:

    What was Red Len Brown saying about this and a tight inner-city circle?

    Lord, that man is mad! But …….

    So are all the idiot planner-driven councils throughout the country.

    These are the same idiots who claim that they are “compelled” by law to increase mayoral AND councillor salaries.
    They are not prevented from saying “NO”.

    Time to implement Nicky Smith’s proposed changes…plus!

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  5. jcuk (1,484 comments) says:

    Why do so many people have to enslave themselves to a bank instead of renting?
    increasing land sub-division of productive farmland is wrong and people should appreciate that if they procreate then they cannot have quarter acre sections … the choice is simple. No doubt I will be attacked by those living in the past for making that point.

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  6. East Wellington Superhero (1,143 comments) says:

    @ jcuk

    Are you serious? Or just trolling?

    1. You’re more enslaved if you’re renting – the landlord can kick you out. If you’ve got a mortgage you’re only kicked out if you can’t pay it, and if you can’t pay your mortgage, then you probably can’t pay rent either.
    2. You’re more enslaved to the bank if house prices are high.
    3. Renters are also ‘enslaved’ to the wealthy landowners who love it that more people are renting and lifting rental demand.
    4. Having your own property also means you can borrow against it to a) start a business and employ other people b) take a short term load for a holiday, an operation, a funeral, emergency etc etc. It’s a form of security for you and your children. c) you can get a pet (yay) d) you can renovate it/have parties etc etc.
    5. More property ownership mean less sway of central government over the people.

    Or… we could all just be renters.

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  7. gazzmaniac (2,845 comments) says:

    Re the Ikea thing – the one and only thing I liked about it was the underground roads and parking. One of the big issues in medium to high density cities is traffic and parking, especially in older cities that haven’t been designed for cars and trucks (insert European city name, or any major colonial era city such as Sydney or Melbourne) but also in the higher density parts of newer cities such as Southport and Surfer’s in Gold Coast City (only using that as an example because I live here and know about it).
    Whenever somebody starts talking about “medium to high density living” being a good thing it is always the traffic and parking issues that come to mind first. An approach such as the one mentioned, with the transport infrastructure underground and parking close enough to the elevator to be useful would mostly solve this problem. It doesn’t solve the problem with the rest of the infrastructure, such as the requirement for larger water mains, electrical cables, telecommunications etc, these could be installed near the transport corridor.

    While I much prefer to have a bit of space and that solution won’t appeal to a large portion of the population (people who have a dead car collection or want to grow their own veges for instance), it does warrant some consideration.

    That said, New Zealand (and Australia) have a lot of space to use for development so there is really no need for such a development.

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  8. Viking2 (14,467 comments) says:

    Of course there is not a jot of anything new here. All been said before by the many. More of the Nats. consultants reports that will end up in the dustbin of useless stuff for eternity.

    The real issue is the low growth of wages in the private sector versus the public sector. Low productivity becuse of public sector interference in our lives.

    That’s the nub of the issue. That’s why the house price to wages ratio went up and remains that way. Of course the tax take also rose in that time lowering the disposable income (and despite claims to the contrary remains up because of indirect taxes.)

    Disposable income is also under stress because of the level of unemployment and inability of people to get work. Second incomes have been squashed and because of one income there is no unemployment benefit for the other person. An issue that badly needs addressing as unemployment should apply to any person who has been working, after all they have paid their premiums.

    Like all consultants reports it will be a load of bollocks.

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  9. Sam Hill (42 comments) says:

    I’d like to know how many of those houses have been built as second or third homes for wealthy folk.

    The government goes ahead and insulates homes even though they are leaky and rotting.

    Housing is the biggest crisis facing this country.

    More and more pressure is going to fall on Auckland to provide jobs and a vibrant economy to sustain an ever increasing population.

    There is plenty of land and empty homes elsewhere in the country. Maybe we need to have a genuine discussion about Auckland not being able to afford or logistically cope with what is going to happen there in the next 20 years.

    We’re lacking affordable homes for families. There is an over-supply of 3 bedroom homes, ashortage of 1-2 bedroom houses and a huge shortage of 4-5 bedroom homes.

    Imprtantly, we’re also lacking jobs and exports to pay for those homes.

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  10. thedavincimode (8,136 comments) says:

    This problem will disappear when Dunne, in a final act of pork barrel desparation, announces an election policy of paying for houses for people with young families.

    The coincidence that he was a key Minister in the government that fuelled a borrowing binge creating the upward housing spiral, and helped capitalise WFF benefits into the housing market through rorts that would have been as plain as the hair on his head will not be noticed by him.

    Pete George will comment: “I’m pretty relaxed about this. The wealthy should also be permitted to particpate in this scheme because not only is it fair and sensible, it’s not right that they shouldn’t get a benefit in return for the taxes that they pay.”

    When pressed on the matter, Pete George will add: “This has to be seen as an investment in our children’s future”. When asked to substantiate the return on this “investment” and demonstrate the marginal benefit relative to the status quo, or explain why people who choose to wait until they can afford their families won’t be entitled to participate, Pete George will say: “we think the mix is about right. This produces an outcome that is both fair and sensible.” When asked why it is fair and sensible and how it is that families have managed to survive the last 170 years without this type of government intervention without everyone winding up in the pokey, on drugs ands on the bludge like a certain well-known welfare bludger, Pete George will respond: “I’m pretty relaxed about this.

    When taken to task about this blatant pork barrel nature of this initiative, Pete George will respond: “We aren’t talking about pork barrels here; we’re talking about giving people houses as an investment in our future.”

    When asked about potential capital gains tax on such properties in the event that his party crawls between the political sheets with Liebour after the next election, Mr George will comment: “Well of course, this would now be the family home and exempt from CGT, even though they were given the house for nothing.” When questioned on why that is fair and equitable for people who choose to invest their savings in productive assets rather than chase tax free gains in the residential property market, Pete George will state: “Because investment in the family home is an investment in our future”. When it is pointed out that this policy is also merely another case of pork barrel politics, Pete George will respond: “Look, I don’t think that is the case at all; this policy is perfectly fair and sensible. Ultimately it’s the voters who will decide”. When asked if he thought that more people would vote for him and get him into parliament because of this policy, Pete George responded: “I certainly hope so. I need to up my income because my WFF has topped out.”

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  11. Colville (3,135 comments) says:

    EWS @ 2.29
    I recently sold my 2200 m2 well placed section to a developer, I am now happily renting a modern 6 bedroom house with a tennis court and a pool for $500 a week. Rates, insurance and deperciation on the house are more than I pay in rent totally ignoring the cost of the Mil$ or so it would cost to buy the place. Renting rocks!

    Generally in times of low or zero cap growth its costs you money to own, a well written lease is a LOT cheaper.

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  12. dime (13,131 comments) says:

    Da Vinci bahahahaha

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  13. East Wellington Superhero (1,143 comments) says:

    @ Colville

    “Generally in times of low or zero cap growth its costs you money to own, a well written lease is a LOT cheaper.”

    Yes, in your situation you seem to have done the right thing. The longer term problem is the inability for young New Zealanders (and low income older NZers) to get the security of their own property. They don’t all have 2200 m2 houses to sell – or the security of the cash equivalent.

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  14. Joseph Carpenter (215 comments) says:

    Re: the last two points, finally at last, Hallelujah! – auditing the BCA’s for consent approvals. The Government must make the DBH respond to the many thousands of complaints about the massive flagrant breaking of the law by Local Authorities with respect to the BCA at least, they should also do the same with the RMA and also survey the absolute rorting going on with development levies under the LGA. Hopefully when they see the huge fraud and misfeasance going on they will go further and actually enforce the law and remove consenting authority (and the massive fee income) from some Local Authorities to remind them of their most basic regulatory and statutory duty.

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  15. krazykiwi (8,245 comments) says:

    When you see ‘Commission’ and ‘Report’ together, picture the flushing of a bucket of cash down a toilet.

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  16. wreck1080 (5,056 comments) says:

    “Of course the usual pea-brains with complain about more roads, more traffic”

    So you do not believe traffic congestion is a major problem in Auckland? Lets build 100,000 houses in South Auckland and see what happens to the motorway systems.

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  17. East Wellington Superhero (1,143 comments) says:

    @ wreck1080

    Yes, traffic congestion is an issue problem in Auckland. With the rain last night the CBD was a freaking nightmare. But I’m not sure if it’s any worse than any other city. Yes, you don’t get a 5min run to work like you might in Timaru, but please, what do NZers expect? I think some are living in the 50’s.

    The point is, if we have less regulation about building, and let the market decide, satellite business areas can develop and workers can spread out, instead of concentrating. And moving the Port of Auckland’s activity (and yes, losing the Port itself) to Northland & Tauranga and having a large inland port in Southern Auckland, will also reduce the traffic load in central Auckland.

    But Kiwi control freaks may not allow these things to happen.

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